Favoritism in a Family Business

December 20, 2021

Favoritism in a Family Business

The last post examined a family business not operating well. Did you pick out their problems? Favoritism is one but there are others.

Favoritism or Nepotism

Large companies are not always a picnic to work in, but usually the Powers-That-Be have realized the problems associated with hiring or working with a relative. Thus, it is usually forbidden.

However, in a family business, it’s not only allowed but a foregone conclusion. Initially, family is probably needed because they might work at lower (or no) wages until the business takes off. And when it does, it’s only natural to extend employment to other family members. So, in our example, the mother, daughter and son are all in the business.

But being family doesn’t mean having the marketing, finance, production, or organizational skills that the job requires. But it can be galling for a non-family employee—presumably hired because they did have what the job needed (like You). And, as in any company, people who can’t or won’t do their work, make it more difficult for those who want to do a good job.

Non-performing workers might be fired in a larger company, but, in a family business, the personal may supersede work needs (We can’t let Joey go—who else would hire him?). So, firing is less likely or delayed long past the point where it’s clear Joey isn’t up to the job.

Sibling rivalry

Family dynamics can carry over into the work place. In our example, the rivalry between the two siblings, Carl and Martha, played out at work by both battling for control. Discussion about Martha’s new product escalated quickly into something which wasn’t about pro-biotic lotions.

The Harvard Business Review points out that business decisions are sometimes avoided (or taken as an end run, as in our case) because they will highlight the underlying family conflicts.

Merit versus entitlement

Martha makes a snide remark about Carl being at a casino during working hours with a company car. Although she was probably just saying it to get under Carl’s skin, she highlighted an important issue that can plague a family business.

It’s one thing to borrow Mom’s car; another to use a company car for personal use. Sometimes, family members don’t make the distinction. They might assume it’s fine as it all eventually goes into one pot—i.e. the family’s wealth. However, mixing personal and business expenses is frowned upon by tax departments and could cause problems if the company is audited. Similarly, Carl was taking time off during working hours. He doesn’t seem to feel that he has to earn his salary.

All examples of family members feeling entitled to use business resources (time and assets) as if they were their own.

A fourth: the founder’s need to control

Forbes Magazine points out that entrepreneurs like Donna need to power through the obstacles to creating a successful business. While this belief in self is critical initially, it’s not unadulteratedly positive once the business prospers.

Martha wants new products but her mother vetoes the idea. Entrepreneurs can have trouble allowing others a say in the business, often because they’re sure they know what’s best, or can’t or won’t accept that times might have changed.

Similarly, the entrepreneur/owner may ignore suggestions of retirement, as Donna did, to retain control of their baby.

So, nepotism, sibling rivalry, entitlement, and the founder’s need for control can heighten the complexity of making decisions in a family business. As a non-family employee, you need to navigate among these minefields. The next post gives you suggestions on how to do that.

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